You need to run cognos configuration on the device where you are running
transformer.? This will point transformer to the cognos environment of your
choice.
From the error, it sounds like you have not done this.
The default, if you have not configured cognos, is that it points to localhost
as the gateway.

I'm not using any device. I login to the server using Remote Desktop. The one thing is that another user who created the original Transformer model does not get this error. So it appears like it's a Signon issue, and Transformer is not letting me create any cube from that same Transformer model. I tried adding my login under View, Signon and even that didn't help.
When I create a cube from this model, it asks for my loging, and after I enter my credentials it gives me the error above ("The IBM Cognos gateway is unable to connect to the IBM Cognos BI server. The server may be unavailable or the gateway may not be correctly configured. Try again or contact your administrator." )
Hope this helps.

Are you absolutely sure that you are indeed executing transformer from the same folder as the other user who it works for?
When you sign on remotely, it could be possible that if you are using an icon to execute transformer than the icon you use isn't pointing to the same area as the other user.
The error you are getting has nothing to do with security. It is saying that for the install of transformer you are using, the config is not pointing to a valid Cognos server.

There can be multiple installs of transformer on the same server.
Maybe one person installed it (under their id) and then someone else installed it (under their id) and multiple installs show up.

My theory is that there are multiple installs on that server and you are using one, and the other user is using another. His (or hers) is configured, yours is not.

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